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Fed Opens the Books on Bear, AIG Toxic Assets

The Federal Reserve Bank of New York lifted a veil of secrecy on the troubled mortgage assets it purchased as part of the 2008 rescues of Bear Stearns Cos. and American International Group Inc.

The disclosures listed scores of subprime residential mortgage securities and pieces of commercial loans made to dozens of properties across the country, such as the Crossroads Mall in Oklahoma City—featuring the city's only indoor full-size carousel—and the Hilton Garden Inn in Panama City, Fla.

Commercial real-estate loans in the Bear portfolio have an unpaid principal balance of about $8.3 billion and were valued at about $4 billion in the fall of 2009, or about half their original value. Above, the headquarters of Bear Stearns in 2008.
Bloomberg News

The data show the government is now in the same situation as many U.S. banks: dealing with a portfolio of loans and property that have lost their value, and which borrowers are struggling to pay off.

For months, the regional Fed bank has been under pressure from lawmakers to make public details of the assets in three special-purpose companies that were created to take on roughly $80 billion in mostly troubled mortgage positions previously held by Bear Stearns and AIG.

The New York Fed was earlier reluctant to release detailed information about the mortgage portfolios because officials felt identifying individual loans and securities could make it harder for the assets to be sold for competitive prices in the future.

The three "Maiden Lane" portfolios, named after a street adjacent to the New York Fed's Lower Manhattan headquarters, are managed by
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which also provides valuations on the assets. As of the end of 2009, the New York Fed was owed about $62 billion by the three Maiden Lane vehicles.

In a statement accompanying Wednesday's disclosures, the Fed said it "recognizes the importance of transparency to its financial stability efforts and will continue to review disclosure practices with the goal of making additional information publicly available when possible."

Many of the assets have deteriorated over the course of the financial crisis and economic downturn as more homeowners and commercial borrowers have defaulted on their mortgages.

Commercial real-estate loans in the Bear portfolio have an unpaid principal balance of about $8.3 billion and were valued at about $4 billion in the fall of 2009, or about half their original value.

Today, the overall Bear portfolio, known as Maiden Lane LLC, is worth about $27 billion. That is about 10% below the $30 billion that Maiden Lane paid for the assets as part of Bear's rescue sale to J.P. Morgan Chase & Co., in 2008.

The details released Wednesday included the identifiers of individual securities and loans and their principal balance or par value. The New York Fed didn't provide information on the valuations of each asset or data that would identify residential home loans, saying the latter "would violate individual borrowers' privacy."

The general size of the government portfolio has long been known. Wednesday's disclosure, however, showed the range of the properties under its control.

One loan controlled by the government is $12.75 million in financing Bear provided to the owner of the 167-room Radisson Hotel in Jacksonville, Fla. The hotel is owned by a venture controlled by Philadelphia real-estate investment company AMC Delancey Group Inc. Kenneth Balin, AMC chairman and chief executive, said he believed Bear provided the loan with plans to include it in a debt pool known as a securitization. But that never happened, leaving Bear, and now the U.S. government, with the note.

Mr. Balin said that, so far, he gives top marks to those overseeing the loan on behalf of the U.S. taxpayer.

"The people that are handling this note are behaving responsibly," Mr. Balin said.

Mr. Balin said the loan was used to refinance debt borrowed in 2004, when it bought and then renovated the hotel property. Noting guest-satisfaction surveys, Mr. Balin added: "It's a beautiful hotel."